For professionals working in finance, compliance and risk management, the regulatory outlook, at least in the United States, might best be described over the past many years as “always evolving”. And in today’s environment, that remains constant. While there has been talk of rolling back some financial regulations, regulatory reform is to date only one of many areas where U.S. policy could shift from past positions. As a result, banks, insurers and capital markets firms are continuing to strengthen the structures needed for regulatory compliance — particularly their digital and technological capabilities — while keeping one eye on the horizon for signals of policy change.

Outside the U.S., meanwhile, regulations are moving ahead at full steam, as a number of major global initiatives take shape. These include Markets in Financial Instruments Directive (MIFID) II, General Data Protection Regulation (GDPR) and Fundamental Review of the Trading Book (FRTB) to name a few, all with varying timeframes for implementation. Institutions with cross-border operations are working to get the necessary digital structure in place to be more effective in monitoring, data collection, modeling, analysis, reporting and other activities mandated by these broad regulatory frameworks.

Regulators make every effort to harmonize new rules and avoid jurisdictional conflicts, but there is no one common set of globally agreed rules and it is often difficult for institutions to obtain guidance and interpretation on global regulatory requirements. Regulatory technology (RegTech) can help, but RegTech developers themselves must spend time and energy sorting out sometimes conflicting requirements (e.g., intent, content, values and timing). Nevertheless, there are broad strategic principles that can help institutions optimize their compliance efforts in a time of uncertainty.

Get the infrastructure in place. No matter what direction regulations might take in the future, firms should have basic elements in place in areas including monitoring, stress testing, and modeling (with clear trails on where data comes from and how it is used). Firms also need the kind of management analytics that allow them to identify and remediate potential problems before they get out of hand.

Leverage technology to lower costs. The cost of compliance has become a major issue for firms, particularly those lacking the scale to absorb major new initiatives. Firms should be exploring the possibilities presented by RegTech (encompassing innovations such as artificial intelligence, cloud, analytics, and robotic process automation or RPA) and the use of shared services and industry utilities to lighten the cost burden.

Address emerging risks. Cybersecurity is an area of growing regulatory focus, where firms should be able to demonstrate that they have active and effective programs up and running. It is also an area in which talent is in high demand, making it more difficult to design and implement strong defenses.

Focus on culture. Institutions should be taking a proactive look at conduct, incentive compensation structures and other possible problem areas regardless of pending legislation or regulatory initiatives. Obviously, it is much less expensive and much more effective to address issues before, rather than after, they come to the attention of regulators and other stakeholders. Similarly, firms with clearly articulated and well communicated principles for culture and behavior tend to withstand regulatory scrutiny better than those without.

Complex new regulatory frameworks have become a fact of life for banks and other financial institutions. The key to success for financial services firms — in addition to digitally driving down the cost of compliance – is in keeping a positive, constructive tone with regulators while looking for ways to create value from reform. Firms that use mandated compliance activities as a lever to improve management controls, ensure proper conduct and reduce operational risk will, we believe, have important competitive advantages over firms that focus only on the more mechanical aspects of compliance.

I am the senior managing director of Accenture Finance and Risk Services. Based in Chicago, I have more than 20 years of global experience working with clients to define strategy, and execute change programs across a broad spectrum of risk management and finance disciplines...